Tuesday, May 01, 2007

The United States Supreme Court has ruled on Microsoft v AT&T, a dispute over patent infringement abroad. Patent law is pre-eminently national, so it does not apply over items manufactured and sold in other countries. American patent law has only one exception to that rule, and it is if components have been manufactured in the U.S. and then are assembled abroad then there can be infringement actionable by U.S. courts (s271(f) 35 U.S. Code).

The case is whether there is patent infringement for a software product that may be sent in a master disk from the United States, and then assembled and sold abroad. AT&T owns a patent over speech-encoder (RE32580), and it sued Microsoft arguing that Microsoft Windows contains code which infringes their patent claim. AT&T included in their infringement suit international claim for all copies of Windows manufactured and sold abroad, a claim that Microsoft contended.

The U.S. Supreme court was asked two questions, is Windows a component in the sense of s271(f)? Here the answer was yes. If so, was the component supplied from the United States? The answer here was no, as evidence pointed out that the physical master disks were shipped from places outside of the United States to overseas assembly factories, even if there was a presumption that some of the software could have been coded in the U.S. AT&T protested that this was a loop-hole in the legislation. The Court recognised that was potentially a concern, but that it was up to the Legislative to plug the hole. They commented:

"AT&T urges that reading §271(f) to cover only those copies of software actually dispatched from the United States creates a 'loophole' for software makers. Liability for infringing a United States patent could be avoided, as Microsoft's practice shows, by an easily arranged circumvention: Instead of making installation copies of software in the United States, the copies can be made abroad, swiftly and at small cost, by generating them from a master supplied from the United States [...] The 'loophole', in our judgment, is properly left for Congress to consider, and to close if it finds such action warranted."

However important this discussion is, to me the most important part from a foreign perspective is the unambiguous statement against extraterritoriality. The ruling states:

"Any doubt that Microsofts conduct falls outside §271(f)s compass would be resolved by the presumption against extraterritoriality, on which we have already touched. The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law."

It's refreshing to see extraterritoriality shut down in certain terms by the U.S. Supreme Court. This is heartening, as it helps to maintain software patent madness well within American borders. We can only hope that it stays there.